Asset allocation model portfolio assets continue to grow as adviser practices shift the way they construct client portfolios as asset allocation model portfolio assets are projected to reach $2.9trn by 2026, according to The Cerulli Report—U.S. Asset Allocation Model Portfolios 2024,
Cerulli’s research found the percentage of US adviser assets managed by firms identifying as model users increased to 13% as of year-end 2023, while representing 18% of advisor headcount and 22% of adviser practices. Moreover, more than one-third (34%) of outsourcer advisers expect to increase their use of model portfolios over the next 12 months.
As the role of many financial advisors continues to shift in favour of financial planning offerings and outsourced portfolio construction, asset managers must consider how they can take advantage of the growing distribution opportunity.
“The opportunity is readily apparent in the asset allocation model portfolio product landscape for providers of investment product building blocks to take advantage of increasing outsourced portfolio construction,” said Matt Apkarian, associate director.
While most model portfolio assets are still in proprietary-only products, expected demand for open-architecture model portfolios has been increasing as a growing cohort of model-using advisors want products that use a diversified set of managers. According to Cerulli, 30% of asset manager model providers plan to expand the use of non-proprietary investment options in models to meet the demands of advisors seeking open-architecture products.
Apkarian said: “Asset managers not currently targeting inclusion in model portfolios as a method of distribution for their investment products should assess how they can best target the growing model landscape as a distribution channel.
“While building out a models business may not fit the capabilities and resource constraints of an investment product provider, seeking placements within models should be one of the top distribution opportunities being targeted by a provider of model building blocks.”
